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Speculation over delay of Air Force tanker contract heats up

Richard Aboulafia, Vice President, Teal Group Corporation

Even before word of EADS leader Sean O'Keefe surviving the plane crash that killed former Senator Ted Stevens, industry analysts were saying the Air Force tanker deal may not be awarded on time. EADS and Boeing are the two companied vying for the $35 billion KXC contract. A Morgan Stanley aerospace analyst wrote that she expects the November deadline to slip to a 2011 decision, and the Wichita Eagle reports awarding the $35 billion contract could be pushed all the way into 2012.

Richard Aboulafia, Vice President of the Teal Group Corporation told the Federal Drive this morning that the industry chatter expecting delays is not unexpected.

"The thing is, predicting delays with this program, that's an thing easy thing to do," Aboulafia said. "So many false starts and so many delays."

So the news about EADS CEO O'Keefe was just the latest twist in the story. Aboulafia though, doesn't think it's one that has much bearing on the situation.

"I really don't think it does. A man like that at the very top of an organization is in charge of grand strategy," Aboulafia said. "The actual people who do the mechanics of the bid and everything like that are very much at work, for that matter the bid has been submitted. So I really don't think it'll have an impact on the timing of the Pentagon's decision on KCX."

What does have bearing? The extremely political nature of this contract's history

"There's a feeling that because this is the most politicized contract, I think, in the history of the U.S. Military, that inevitably having it so close to the November election is just problematic," Aboulafia said.

The contract has had numerous bids and re-bids over allegations of unfair practices and bribery for nearly 10 years, due mostly to the fact that the two companies have been closely aligned with the two political parties; EADS with the Republicans and Boeing mostly with Democrats. Debates have ensued over where the work that is awarded will actually be carried out.

The companies themselves have been raging a war of ad campaigns.

"I think it's just to create an awareness of who they are and what their job's footprint is. That's why I think at the end of the day, a lot of this really comes down to this election," Aboulafia said. "Effectively, all the decision makers, up and down the Congressional staffs and committee staffs are going to be made aware that it's up to them to pressure the Pentagon to move the contract in their area."

What about the idea to split the contract between the two companies?

"Secretary of the Defense Gates has made it clear he wants absolutely nothing of the sort, so it doesn't look like that'll be a way forward at all," Aboulafia said.

So if it's going to come down to one, the question remains: when will the decision be made?

"I understand why people are predicting [the delay], but I'm not going to, I think they're going to hold the line in November," Aboulafia said.